The lamentable trend of industry layoffs, studio closures, and game cancellations is no secret. It seems to be touching every sector and vertical in the game industry, from early-stage startups to multitrillion-dollar market cap tech firms. However, there is a subset among these struggling companies that stands out from the rest. These are the studio megaraises: the cohort of venture-backed gaming companies that have raised $50 million to more than $100 million to fund mostly pure-play, content-focused businesses. The Gamecraft podcast refers to these as “The Venture Deadpool” as nearly all of them appear to be in dire straits financially.

Two examples that recently made headlines include Build A Rocket Boy  — it raised a $110M Series D in January 2024, only to suffer a disastrous launch andthen layoffs in June 2025 — and 1047 Games — creators of the struggling Splitgate 2, recently covered by Naavik Digest, which raised $100M back in 2021 and went on to institute layoffs just weeks after launch. 

While there are many others that we could mention beyond these two, the point of this article is not to cast aspersions, but rather to examine the knock-on effects these massive investments have had on the funding ecosystem at large and identify the remaining opportunities for teams with similarly grand ambitions. 

The Megaraise Environment

There are several commonalities among this cohort beyond the major funding amounts. Chief among these is the background of the “zero interest rate policy,” or ZIRP, environment underpinning all the risky funding. Partially as a result of ZIRP, there were many eager generalist investors piling into gaming in search of a risk-on asset class, who didn’t have a full understanding of industry dynamics. That resulted in an over-index on brand names (e.g. the ex-Riot/ex-Blizzard diaspora) and an incomplete grasp of these ventures’ ability to realistically return capital.

There were similarities among the founders themselves too: great game makers, to be sure, but clearly not experienced capital allocators or business strategists. These founders pitched massive visions for open-world games, competitive FPS titles, MMORPGs, UGC platforms, or persistent live services — all ideas that sound fascinating on paper but require huge investments, specialized expertise, and long runways to execute. 

Furthermore, these grandiose visions also require — with minimal evidence to support it — implicit trust (see again: founder pedigree) that the teams are onto something big and compelling. Most of these companies were pre-product when they raised these huge rounds, and even those that had traction (e.g. 1047 Games with the first Splitgate) were not necessarily able to translate it into sustainable businesses.

Finally, there was the larger regression in the game market from the post-COVID highs of 2020 and 2021, with engagement hours rapidly siphoned away toward social video (e.g. TikTok, YouTube) or further concentrated into “black hole games,” making it harder than ever for new games to even keep pace with initial forecasts that had assumed continued industry-wide growth — let alone break out as new hits.  

All of this has been covered at length elsewhere (including in this very newsletter), so we won’t spend much time rehashing the past. Yet it’s important to recognize the throughlines connecting these companies; they continue to create ripple effects today.

The Shifting Sands of Game VC

The most prominent reaction to these trends has been the rapid pullback in game venture funding. Venture capital investments have slowed significantly at a macro level, while individual deals have largely failed to reach the massive scale of the megaraise cohort. 

Though large early-stage deals are still occasionally consummated, there really haven’t been any recent instances of content-focused ventures reminiscent of the megadeals of ‘20-’22. Of the headline seed and Series A content investments made in recent months, Turkish mobile developers have led the way, with Grand Games ($30M Series A in January ‘25), Bigger Games ($25M Series A in June ‘25), and Good Job Games ($23M Seed round in March ‘25) being among the largest deals of the year thus far. From there, a few notable early-stage content investments have come in around $10M to $12M, with many more being announced at $7M or less.

However, early stage doesn’t exist in a vacuum. The bottom of the funnel — exits via IPO or M&A — has been slow to rebound too. Though we have seen the total value of M&A pick up slightly in the past few months, it has been more of a function of large deal value (e.g. Niantic to Scopely for $3.5B, AppLovin’s game portfolio to Tripledot for $800M, etc.), as the overall deal count has remained relatively stable.

As exits have been slow to consummate, venture funds must necessarily be slow in returning capital to their LPs. This makes raising newer, larger funds even more difficult. Nevertheless, new gaming-oriented venture funds continue to emerge. 

Many of these investors are entering the market with a narrow regional focus relative to the prior wave of game-specific investors. Firms like Lumikai (India) and The Games Fund (Central and Eastern Europe) have already charted a path, but a handful of new entrants have popped up to support teams in Europe (Kameha Ventures, Behold Ventures), MENA (Laton Ventures, Beam Ventures, Merak Capital, Impact46), and India (Centre Court Capital), among others. We should expect to see more gaming venture deals emerge from these new funds in the coming months and years as they begin to deploy capital.

Regardless of the fund, gaming venture capitalists are still going to be hesitant to invest in the sorts of ambitious content plays common among the studio megarises. To quote game investor David Kaye: “The bar for raising venture in games is now astronomical. It should be. When studios burn through $100M+ with nothing to show for it, something is fundamentally broken in how we're building these companies.”

Alternatives to Venture

Despite the pain associated with the high-profile failures of studio megaraises, the right-sizing of venture investment in content-focused game startups is likely symptomatic of a much-needed correction. Big venture dollars require venture-sized outcomes (20 to 100 times greater), which are incredibly difficult to achieve with hit-driven content plays, even in the best of market conditions. 

These lofty goals were further inhibited by the even loftier valuations placed on these megaraise ventures. A pre-product startup valued at a few hundred million dollars would necessitate a return in the tens of billions in value, which would put it somewhere in the top 10-15 of all game companies worldwide by market cap. 

Massive VC investments also push teams to make operational decisions (around hiring, marketing, project scoping, etc.) that founders might otherwise have avoided or at least delayed had they pursued other avenues of financing. Combine that with poor management of financial risk — going all in on a single debut game without leaving runway for pivots, for example — and you end up with a recipe for a disaster. 

For better or worse, there are good reasons why content-driven game businesses have historically been more likely to find funding via game publishers than venture capital firms. Incumbent publishers are far better equipped to provide the operational support startups need (go-to-market strategy, staff augmentation, marketing and PR, etc.) than VCs. Though publisher money may come with more strings attached, it fills an important need in the marketplace. 

However, in many cases, the money from game publishers is intended for investment in the completion of a game, not in a business. There is a crucial difference here when considering the sustainability of each type of investment that appears to have been overlooked with some of the studio megaraises. VC dollars are simply not a good fit for project financing. Rumor has it that some game VCs are beginning to shift funds toward more project-based vehicles, but there are many other funding options available to founders that may be better suited to that need. 

Indeed, there are now a wider variety of publishers and publishing models available to game teams than ever before. In addition to the standard publishing agreements with AAA incumbents that we are likely all familiar with at this point, renewed interest in the AA, A, and indie spaces has created opportunities for unique funding arrangements to emerge. Kepler Interactive’s co-ownership model (also covered recently by Naavik Digest) is one such example, as is Blue Ocean Games and its hybrid equity and revenue-share “SAIL” (structured agreement for indie launch) deal.

Other options include pursuing funding from existing platforms, though these may require development for a certain ecosystem. Meta, for example, has launched a $50M creator fund for its Horizon platform and has partnered with several gaming VCs on an India-focused gaming accelerator. Roblox, too, has a creator fund, as does Overwolf.

All of these funding options have their pros and cons, but one thing is a certainty: None of them will provide the sort of war chest the studio megaraise companies have. In any case, perhaps the biggest lesson for founders and investors from the last few years of content-based game venture financing is that the vast majority of teams should simply not raise massive sums of money to make a game, nor should investors be willing to fund them. Founders need to show evidence of traction, and venture capitalists should demand a higher bar for investment. Not only will this result in a healthier deal structure for all involved, but it will lead to a more robust ecosystem overall. 

In Conclusion

Perhaps one silver lining to the struggles of these mega-startups and the subsequent pullback in VC investment that they (at least, in part) begat is that the game financing deals of the future will be more sustainable.

The studio megaraise may be a thing of the past, but there will doubtless continue to be a stream of ambitious, new, content-focused ventures founded by highly pedigreed operators. 

With each successive round of layoffs, more and more newly displaced workers are contemplating the path of entrepreneurship. Though these aspiring founders may not garner the eye-watering investments of their predecessors, they will perhaps be forced to properly scope their ambitions, limit their headcount growth and monthly burn rates, and, most importantly, prioritize sustainable company building (rather than simply sprinting toward a game launch).

We may even be entering an era that favors a new class of founder altogether: one that stays small, that leverages emerging technologies to multiply its impact, and that finds a product-market fit through rapid small-scale iterations. 

Perhaps we are already seeing examples of this in the UGC ecosystem, where a growing number of investments and acquisitions are occurring around Roblox and Fortnite. AA and indie games, too, are receiving increased attention from the gaming public. Could these small teams translate their early wins into bigger bets and larger companies in the future?

It's worth noting that most of these ventures will fail. The same can be said for any startup, regardless of industry. But ambition was never the problem. With a more sustainable financial scaffolding, the studios that survive and thrive in this new era won’t be those that burn the brightest, but the ones that build the longest. 

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In Other News

💸 Funding & Acquisitions:

• Million Victories secures almost $40M in a funding round.
• Circle Games raises $7.25M to build mobile puzzle titles.
• BetaDwarf receives an undisclosed investment from Square Enix.

📊 Business & Products:

• Pokémon Go celebrates its ninth anniversary and $8.8B in gross player spending.
• Valorant Mobile hits 40M pre-registrations in China.
• Clash Royale hits a post-pandemic record of $3.8M daily revenue with its new mode Merge Tactics.
• Savvy Games Group and PNU’s Applied College sign MoU to equip women for careers in game development.
• The CoLab has partnered with Universally Speaking to boost the quality of indie games.

👾 Miscellaneous:

• Scopely’s Monopoly Go! teams with Marvel’s Fantastic Four film on a crossover.
• Tainted Studios unveils V.O.I.D., a web3 survival game, with a new distribution strategy.
• Amazon gets the green light to sell the Nintendo Switch 2.
• Aonic offers the state of game investment in 2025 and tips for raising funds.
• Destiny’s mobile spinoff will arrive in August.

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Content Worth Consuming

Aream & Co. Q1 Video Game Market Update (aream.co): “This report covers key Q1 2025 trends across the gaming industry, highlighting developments in market performance, dealmaking activity, and capital markets. It explores growth in PC and mobile gaming, stability in consoles ahead of major releases, a surge in M&A led by mobile, challenges in private financing, and the resilience of gaming software amid broader market volatility. The analysis provides a snapshot of sector momentum and investor sentiment going into the rest of the year.”

Rise of Fearless: Building Africa’s Fortnite from the Ground Up,with Kanessa Muluneh (Rise and Play Podcast): “In this episode, Sophie Vo sits down with Kanessa Muluneh, an Ethiopian-born serial entrepreneur, web3 educator, and the creator of Rise of Fearless — Africa’s first blockchain-enabled mobile battle royale game. From humble beginnings as a refugee in the Netherlands to raising $10M in under 10 days through social media, Kanessa shares her transformative leadership journey, her mission to reframe Africa’s global image, and how she leveraged storytelling, blockchain, and gaming to empower African youth.”

Creating the Music for Clair Obscur: Expedition 33 with Composer Lorien Testard (The AIAS Game Maker’s Notebook): “Austin Wintory chats with Lorien Testard, the composer for Sandfall Interactive's debut hit RPG, Clair Obscur: Expedition 33. Together they discuss his background in music theory and how he connected with Sandfall; working with singer Alice Duport-Percier to create the vocal pieces; creating a soundtrack with diverse sounds that keeps a unified vision; creating art for art's sake; and what kinds of projects he hopes to work on next.”

Night Street's Mac Reynolds Captures the Last Flag (The Fourth Curtain): “Our guest this week is Mac Reynolds, CEO and Co-founder of Night Street Games, making the PvP shooter Last Flag. As manager of the band, Imagine Dragons, he learned how to find magic from the grind and now applies that to a videogame. We discuss Eagle Scouts, learning to advocate and CTF.”

Riding the Wave: How Game Smithing Managed to Surf on the Success of Vampire Survivors (gamesindustry.biz): “Right game, right time. Soulstone Survivors arrived in Steam Early Access just as the wave of hype for Poncle's Vampire Survivors was peaking in 2022. When players were casting around for similar games to Poncle's surprise hit, Soulstone Survivors was waiting, ready to receive them. Nearly three years on, Soulstone Survivors has just emerged from early access. Now that the hype has subsided, the player counts are nowhere near where they were during that explosive 2022 debut — but they remain highly respectable nonetheless. And the game has sold over 1 million copies in total, garnering more than 21,000 Steam reviews in the process, along with a very positive rating. Allan Smith, the founder of Soulstone Survivors studio Game Smithing, talked GamesIndustry.biz through how he was successfully able to leap on a trend — and the brutal effort it took.”

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